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S&P Global Ratings said it will treat all of
RWE AG’s outstanding hybrid notes purely as debt after Germany’s
largest power producer decided to repay some of the securities
at the first opportunity rather than replace them.
S&P will remove equity weightings from all 3.8 billion
euros ($4 billion) of RWE’s hybrid bonds, according to a
statement late on Tuesday, after RWE said it will repay 250
million Swiss francs ($248 million) of hybrid bonds. S&P kept
its rating on the utility at BBB-, the lowest investment grade.
Ratings companies typically count part of hybrid notes as
equity, leading to lower assessments of indebtedness and reduced
borrowing costs. While S&P’s move hurts RWE’s credit metrics,
the company’s bonds rallied as investors bet the ruling removes
any future hurdles to redeeming them. Hybrid notes are undated
and borrowers typically have the right to buy them back after a
set period of time.
“The issuer is now more likely to call all its outstanding
hybrids at the first opportunity as the equity credit cliff has
already been breached,” said Jeroen van den Broek, ING Groep
NV’s Amsterdam-based head of debt strategy and research.
“There’s at least that certainty going forward.”
RWE’s 550 million euros of 3.5 percent hybrid bonds jumped
as much as 4.7 cents on the euro to 96 cents, the highest since
May 2015, according to data compiled by Bloomberg. Its 700
million euros of hybrid notes rose as much as 2.1 cents on the
euro to 99 cents, the highest since April 2015, the data show.
RWE chose to redeem the bonds after raising 2.6 billion
euros from listing its green energy business Innogy SE in
October, chief financial officer Markus Krebber said in a
statement on Tuesday.
RWE AG’s outstanding hybrid notes purely as debt after Germany’s
largest power producer decided to repay some of the securities
at the first opportunity rather than replace them.
S&P will remove equity weightings from all 3.8 billion
euros ($4 billion) of RWE’s hybrid bonds, according to a
statement late on Tuesday, after RWE said it will repay 250
million Swiss francs ($248 million) of hybrid bonds. S&P kept
its rating on the utility at BBB-, the lowest investment grade.
Ratings companies typically count part of hybrid notes as
equity, leading to lower assessments of indebtedness and reduced
borrowing costs. While S&P’s move hurts RWE’s credit metrics,
the company’s bonds rallied as investors bet the ruling removes
any future hurdles to redeeming them. Hybrid notes are undated
and borrowers typically have the right to buy them back after a
set period of time.
“The issuer is now more likely to call all its outstanding
hybrids at the first opportunity as the equity credit cliff has
already been breached,” said Jeroen van den Broek, ING Groep
NV’s Amsterdam-based head of debt strategy and research.
“There’s at least that certainty going forward.”
RWE’s 550 million euros of 3.5 percent hybrid bonds jumped
as much as 4.7 cents on the euro to 96 cents, the highest since
May 2015, according to data compiled by Bloomberg. Its 700
million euros of hybrid notes rose as much as 2.1 cents on the
euro to 99 cents, the highest since April 2015, the data show.
RWE chose to redeem the bonds after raising 2.6 billion
euros from listing its green energy business Innogy SE in
October, chief financial officer Markus Krebber said in a
statement on Tuesday.
